Capitalism vs. Communism Economics Workshop September 14

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Capitalism vs. Communism

• Economics Workshop
• September 14, 2006
• Dr. Kenneth Holland
• Kansas State University

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The Cold War

• The Cold War was the protracted geopolitical,
  ideological, and economic struggle that emerged
  after World War II between capitalism and
  communism, centering around the global
  superpowers of the United States and the Soviet
  Union.
• It lasted from about 1947 to the period leading
  to the collapse of the Soviet Union on December
  25, 1991

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Cuban Missile Crisis

• A confrontation between the Soviet Union and the
  United States regarding the Soviet deployment of
  nuclear missiles in Cuba. The missiles were
  ostensibly placed to protect Cuba from attack by
  the United States, and were rationalized by the
  Soviets as retaliation for the U.S. placing
  deployable nuclear warheads in Turkey.

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Cuban Missile Crisis

• The crisis started on October 16, 1962, when U.S.
  reconnaissance data revealing Soviet nuclear
  missile installations on the island was shown to
  U.S. President John F. Kennedy, and ended twelve
  days later on October 28, 1962, when Soviet
  leader Nikita Khrushchev announced that the
  installations would be dismantled.
• The Cuban Missile Crisis is regarded as the
  moment when the Cold War came closest to
  escalating into a nuclear war.

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Capitalism

• How would you define capitalism?
• What other words come to mind when you think of
  the word capitalism?
• Are these associations positive or negative?

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Capitalism

• An economic system in which the means of
  production are owned mostly privately.
• Capital is invested in the production of goods
  for profit in a competitive free market.

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Etymology

• Latin, caput, head
• The term capitalism was first used in English
  in 1854.
• Marxist writers originally popularized the term.

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Classical Economics

• The classical tradition in economic thought
  emerged in Britain in the late 18th century.
• The classical economists included Adam Smith,
  David Ricardo, and John Stuart Mill.

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Adam Smith

• A Scottish political economist and moral
  philosopher (1723-1790).
• His Inquiry into the Nature and Causes of the
  Wealth of Nations (1776) founded the modern
  discipline of economics and provided the
  rationale for free trade, capitalism and
  libertarianism.

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Natural Liberty

• In his mid-20s he began expounding the obvious
  and simple system of natural liberty.

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Mercantilism

• Smith criticized mercantilism, the theory that
  large reserves of bullion are essential for
  economic success.
• The British government acquired colonies in order
  to acquire natural resources for its factories
  and markets for its finished goods.
• Mercantilism required that colonies not be
  allowed to industrialize or trade with countries
  other than the mother country.

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Physiocracy

• Smith criticized physiocracy, which taught that
  wealth originated in land.
• Smith argued that labor was the major source of
  wealth and that the division of labor was the key
  to economic growth.
• As productivity rises, wages will rise.

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The Invisible Hand

• The free market appears chaotic and unrestrained.
• Actually, it is guided by an invisible hand to
  produce the right amount and variety of goods.
• If a product shortage occurs, the price rises,
  establishing a profit margin that provides an
  incentive for others to enter production.

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Social Benefit

• While human motives are selfish and greedy, the
  competition in the free market tends to benefit
  society as a whole by keeping prices law, while
  still building in an incentive for a wide variety
  of goods and services.
• He argued against the formation of monopolies.

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Laissez-faire

• Smith attacked most forms of government
  interference in the economic process, including
  tariffs on imported goods.
• Government restrictions on trade cause
  inefficiency and high prices.
• Laissez-faire means let them do.

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Self-Interest

• It is not from the benevolence of the butcher,
  the brewer, or the baker that we expect our
  dinner, but from their regard to their own
  interest.
• We address ourselves, not to their humanity but
  to their self-love, and never talk to them of our
  own necessities but of their advantages.

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National Wealth

• As every individual, therefore, endeavours as
  much as he can both to employ his capital in the
  support of domestic industry, and so to direct
  that industry that its produce may be of the
  greatest value every individual necessarily
  labours to render the annual value of society as
  great as he can.

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Communism

• How would you define communism?
• What other words come to mind when you think of
  the word communism?
• Are these associations positive or negative?

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Communism

• An ideology that seeks to establish a future
  classless, stateless social organization, based
  upon common ownership of the means of production
  and the absence of private property.

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Karl Marx

• Karl Marx (1818-1883) was an immensely
  influential German philosopher, political
  economist, and socialist revolutionary.
• He is most famous for his analysis of history in
  terms of class struggles.

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Communist Manifesto (1848)

• The history of all hitherto existing society is
  the history of class struggles.

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Bolshevism

• Marxs ideas were adopted by French
  revolutionaries who founded the Paris Commune in
  1871, the Russian Bolsheviks who overthrew the
  government in the 1917 October Revolution and the
  Chinese Communist Party which came to power in
  1949.

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Atheism

• Marx was an atheist.
• He believed that religion was the opiate of the
  people.
• The owners of capital used religion to keep the
  peasants and workers subjugated by leading them
  to think, not of their present misery, of future
  happiness in heaven.

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Communist Paradise

• Marx taught that paradise would appear on earth,
  following the destruction of capitalism and the
  state.
• Under capitalism, labor is alienated.
• In a communist society, human beings freely
  develop their nature in cooperative production.
• Under communism, there is no government and,
  accordingly, perfect freedom.

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Human Nature Changes

• The nature of individuals depends on the material
  conditions determining their production.

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Determinism

• Marx traced the history of the various modes of
  production and predicted the collapse of the
  present oneindustrial capitalismand its
  replacement by communism, just as capitalism had
  replaced feudalism.
• The appearance of communism would represent the
  end of history.

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The End Justifies the Means

• Marxs moral teaching was that the leaders of the
  Communist Party, which he termed the vanguard of
  the proletariat, were free to commit any crime
  as long as it served the endthe destruction of
  capitalism and the ushering in of communism.
• This historical process, he said, was inevitable.

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Class Struggle

• Those who must sell their labor power are
  proletarians.
• The person who buys the labor power someone who
  owns the land and technology to produce, is a
  capitalist or bourgeoise.
• The proletarians inevitably outnumber the
  capitalists.

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Profit

• Profit is theft.
• It is the difference between the value of a good
  produced by a worker and the wages paid to the
  worker by the owner.
• Due to competition among workers for employment,
  wages will decline, leading to poverty, misery
  and rebellion.

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Revolution

• The state is a committee of the bourgeoisie and
  laws support the capitalists, the ruling class.
• Class conflict between the proletariat and the
  capitalists can only be resolved by violent
  revolution.
• A dictatorship of the working class is a
  temporary necessity before communism is possible.

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Justice

• The principle of distribution in communism, is
  From each according to ability, to each
  according to need.

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The Failure of Communism

• Why do you think the United States won the Cold
  War?
• Why has capitalism proven much more durable and
  attractive than communism?

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Criticism of Communism

• In the 20th century, it is estimated that 50
  million people were killed in the name of
  communism.
• Most of Marxs predictions were wrong, such as
  that communist revolutions would occur only in
  industrial societies.
• It is inconsistent with human nature.
• It ignores the appeal of religion.